On Ramsey's conjecture: efficient allocations in the neoclassical growth model with private information

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractIn his seminal paper of 1928, Ramsey conjectured that if agents discounted the future differently, in the long run all agents except the most patient would live at the subsistence level. The validity of this conjecture was investigated in different environments. In particular, it has been confirmed in the neoclassical growth model with dynamically complete markets. This paper studies this conjecture in a version of this model that includes private information and heterogeneous agents. A version of Bayesian Implementation is introduced and a recursive formulation of the original allocation problem is established. Efficient allocations are renegotiation-proof and the expected utility of any agent cannot go to zero with positive probability if the economy does not collapse. If the economy collapses all agents will get zero consumption forever. Thus, including any degree of private information in the neoclassical growth model will deny Ramsey's conjecture, if efficient allocations are considered.

Investment and bilateral insurance

“…As Ψ * is a continuous, compact-valued, and convex correspondence, the set of constrained efficient plans can be parameterized by Welfare weights (θ 1 , θ 2 ) ∈ R 2 + (Espino, 2005). We say that (C * , K * ) is constrained efficient if it is the corresponding plan sustaining the levels of lifetime utility that solves…”

Asset Trading Volume in a Production Economy

“…3 Differences in discount factor might be more misleading. In that case, it can be shown that the limiting distribution of consumption will concentrate full mass in the relatively patient agent (see Espino [2005] To study asset trading volume, we need to compute equilibrium portfolios. But solving the problem directly is difficult.…”

“…We will not discuss the well-known equivalence results between the allocations and prices corresponding to the following market structures with sequential trading and the previously discussed ADCE allocations and prices. 6 To study different complete market structures, we first present the general frame- is one outstanding share for each firm and then P i θ ij (s t ) = 1 for all s t and j. 7 We do not impose short selling constraints however.…”

A Theory of Firm Decline

“…Among these, the closest work is by Bohacek (2005), who provides conditions under which an economyà la Atkeson and Lucas (1995) admits a stationary and ergodic distribution of consumption. Other papers in this class include Marcet and Marimon (1992), Khan and Ravikumar (2001), and Espino (2005).…”